Provopoulos says timely implementation of program may help economy beat forecasts

By Giorgos Bourdaras

Bank of Greece Governor Giorgos Provopoulos expressed reserved optimism regarding the course of the country’s economy during a presentation on Wednesday of the central bank’s report on monetary policy to a parliamentary committee. However, he did warn that if there are any delays in the implementation of the program agreed between Athens and its creditors, the consequences could be particularly negative for the economy and the country.

“The loan agreement’s prior actions have been implemented, the procedures for the disbursement of the installment have started and the lightening of the country’s debt has been achieved. These developments are positive and are generating well-founded expectations that Greece’s economy could stage a rebound earlier than is currently foreseen,” Provopoulos told Parliament’s economic affairs committee.

“Nevertheless, if there is any lag or delays in the implementation of the program this time, the rebound will move further away and the consequences will be much heavier,” the BoG head warned.

Following a number of questions from deputies that focused on hopes of banks supplying the market with cash after their recapitalization with the money from the next bailout tranche, Provopoulos made an effort to contain expectations regarding liquidity: “Yes, there will be some assistance on the issue of cash flow,” he said, although he added that two more factors will combine to help in this direction: These “channels,” as he branded them, are deposits returning to banks and the banks returning to international markets that will capitalize on the general climate of confidence in the economy.

Those factors, said Provopoulos, will secure banks the necessary liquidity, but this “will only happen gradually, little by little. You cannot go straight from black to white.”

The BoG head insisted on the need for deposits to be returned to local lenders, saying that their “bleeding” before the back-to-back elections in May and June (which he said averaged at 4 to 5 billion euros per month) has stopped but has not been reversed.

“From September 2009 to October 2012, banks lost 83 billion euros in deposits,” he told deputies.